The annual percentage rate, or APR, is the cost per year of borrowing. By law, all financial institutions must show customers the APR of a loan or credit card, which clearly indicates the real cost of the loan.APR is not the same as the interest rate on a loan. Loans charge an interest rate, but usually also charge other fees, such as closing costs, origination fees or insurance costs, which are typically wrapped into the loan. If two loans have the same interest rate, but one has much higher fees than the other, simply shopping by interest rates won’t give an accurate comparison of the loans’ true costs. That’s why there is the APR. By factoring in other fees, APR gives a more accurate estimate of the cost per year of a loan. For this reason, the APR is generally higher than the interest rate. For example, a mortgage company may offer a customer an interest rate of 4% on a mortgage loan of $100,000. But after closing costs and other fees are included, the mortgage could have an APR of 4.1%. Unfortunately, not all financial institutions include the same fees in their APR calculation, so APRs are not always a perfect comparison tool. When comparing loan or credit card APRs, ask which fees are included, so your comparison is accurate.